Edited version of private advice

Authorisation Number: 1051862050747

Date of advice: 6 July 2021

Ruling

Subject: GST and supply of consultancy services

Question

Should you charge goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when supplying consultancy services (via your Australian ABN which is GST registered) to GST registered Australian businesses remotely from outside Australia?

Answer

No. The supply of consultancy services that you remotely make from outside Australia to GST registered Australian businesses is not connected with Australia under the GST Act. The supply is outside the scope of GST law and therefore you should not charge GST on these supplies despite being registered for the Australian GST.

Relevant facts

You are not an Australian resident and currently do not live in Australia. you are registered for GST.

You supply consultancy services remotely from outside Australia to Australian businesses. The Australian businesses are registered for GST. The services do not relate to real estate of any kind.

You are not required to provide your services to entities other than your customers and you are directly engaged by the business you work for.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(5)

Reasons for decision

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act.

Detailed reasoning

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

a)     The supply is made for consideration; and

b)     The supply is made in the course of an enterprise carried on by the supplier; and

c)     The supply is connected with Australia; and

d)     The supplier is registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

When you supply your consultancy services your supply satisfies paragraphs (a), (b) and (d) of the GST Act as:

• You make the supply for consideration; and
• The supply is made in the course of an enterprise that you carry on; and
• You are registered for GST.

We will now consider if your supply of consultancy services is connected with Australia for the purpose of paragraph 9-5(c) of the GST Act.

Is your supply connected with Australia?

A supply of anything other than goods or real property (for example services) is connected with Australia under subsection 9-25(5) of the GST Act if one of the following is satisfied:

a)     the supply is done in Australia; or

b)     the supplier makes the supply through a business that the supplier carries on in Australia; or

c)     all of the following apply:

                           i.          Neither paragraph (a) nor (b) applies in respect of the thing;

                          ii.          The thing is a right or option to acquire another thing;

                         iii.          The supply of the other thing would be connected with Australia; or

d)     the recipient of the supply is an Australian consumer.

Goods and Services Tax Ruling GSTR 2019/1 provides guidance on when a supply of anything other than goods or real property is connected with Australia under subsection 9-25(5) of the GST Act and is available at https://www.ato.gov.au/law/view/document?docid=GST/GSTR20191/NAT/ATO/00001

From the information given paragraphs (a) (b) and (d) in subsection 9-25(5) of the GST Act do not apply to your supply.

Paragraph 9-25(5)(d) of the GST Act

From 1 July 2017 a supply of imported services and digital products made by an overseas supplier to an Australian consumer is connected with Australia. For more information refer to GST on imported services and digital products at https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-services-and-digital-products/

An Australian consumer is an Australian resident who is not registered for GST; or is registered for GST but the purchase is for personal use.

However, GST does not apply to sales of imported services and digital products made to GST registered Australian businesses who are making the purchase for business purposes.

The overseas supplier therefore needs to determine whether the supply of imported services or digital products is made to an Australian consumer.

There are two elements that need to be met for a purchaser to be a consumer:

• the residency element - you can work out the purchaser's residency by either using information about the purchaser from your business system or take reasonable steps to obtain information about the purchaser.
• the consumer element - once you confirm the purchaser is an Australian resident you then work out if the purchaser is a consumer. A purchaser is a consumer if they are either not a business registered for Australian GST or registered for Australian GST but do not purchase the imported services or digital products for use in their business.

To work out the residency and consumer elements the supplier can refer to Goods and Services Tax Ruling GSTR 2017/1: making cross border supplies to Australian consumer which is available at ato.gov.au or go to https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-services-and-digital-products/Terms-we-use/

A supplier can treat their supply as not being made to an Australian consumer if they have gathered sufficient evidence and reasonably believes that the purchaser is not an Australian consumer.

You advised that your supply of consultancy services is made to GST registered Australian businesses. In this instance your supply of imported services is not made to Australian consumers. Your supply of services is not connected with Australia and therefore paragraph 9-25(5)(d) of the GST Act does not apply to your supply.

You need to hold evidence that your supply is made to GST registered Australian businesses before treating your supply as not connected with Australia. For example, you can be sure the Australian business is not an Australian consumer if you obtain the Australian business number (ABN) of the business, and a statement they are registered for GST.

If you do not have evidence that the Australian business is not an Australian consumer, you will treat your supply as being made to an Australian consumer. In this case, your supply to the Australian consumer is connected with Australia and is a taxable supply under section 9-5 of the GST Act since the supply is not GST-free or input taxed under the GST Act

When your supply of services is not connected with Australia your supply is outside the scope of the GST law. You do not collect GST on the supply of consultancy services made to the GST registered Australian businesses despite being registered for GST and do not include these supplies when calculating your annual turnover for GST registration purposes and completing your BAS.

Other information

GST registration

If all of your supplies are not connected with Australia or if you make supplies to Australian consumers and the annual turnover for these supplies is below the GST registration threshold of A$75,000, you can choose to cancel your GST registration.

Correcting GST errors

If you have mistakenly collected GST on supplies that are not connected with Australia, you can refund the collected GST to the GST registered businesses and keep records that you have refunded the GST to the businesses. You also need to issue an adjustment note or an amended tax invoice to the businesses.

If you have not reported the GST you have collected in your BAS, you can omit reporting these supplies when completing your BAS provided you already refunded the collected GST to the businesses, have issued an adjustment note or amended invoice to the businesses and have records of the refund that was made.

Where you have already reported these supplies in your BAS and do not have any future GST liability, you will revise the BAS for the tax period in which you have reported the supplies, provided you already refunded the collected GST to the businesses, issue an amended tax invoice or adjustment note to the businesses and you hold evidence that a refund has been made.